a Goldman Sachs report Released on Friday – “Rise of wealthy India“Wealth is defined as an income of more than $10,000 per year (Rs. 830,000 at current exchange rates). Analysts at Goldman estimate that this class, currently numbering 60 million, will grow to 67 million by 2027. %, reaching 100 million people.”
Currently, only about 4% of the working population earns more than $10,000 a year (this figure is nearly five times the per capita income of $2,100, or about Rs. 175,000), the report said. ing. This group is expanding rapidly, with a compound annual growth rate of 12% from 2019 to 2023, compared to population growth of 1% over the same period.
The rapid increase in wealth has also meant a significant increase in financial and physical assets, including stocks, gold and real estate, over the past three years. “Equities and gold have had the largest increases, while real estate prices have risen even faster over the past three to four years,” the report said.
Goldman analysts point out that the number of demat accounts will jump 2.8 times to 114 million in 2023, with an increase in stock holdings (BSE 200 stocks) and investments in mutual funds. The value of gold held by Indians surged 63% between 2019 and 2023 to $1.8 trillion.
Other results: Demand for premium products surged across industries including FMCG, footwear, fashion, cars and two-wheelers, and companies focused on top-income consumption improved performance. Sectors that are hitting the jackpot are jewellery, travel, luxury retail and expensive healthcare.
Changes can also be felt in companies’ product portfolios. So not only did Nestlé grow faster than Hindustan Unilever, but HUL’s premium portfolio grew faster than its overall revenue. Using credit card spending as a proxy for wealthy spending, the report notes that credit card ownership has increased by 80% since fiscal year 2019, with credit card spending jumping 250% over the same period. (Calculations are based on averages over the past 12 months).
Importantly, Goldman analysts argue that this boom in luxury spending is here to stay. Leisure, out-of-home food, jewelry, institutional health services, and durable goods are the sectors that benefit most as wealth increases. They are also ignoring the coronavirus as a factor. “Our initial hypothesis was that the divergence in consumption between companies that engage in top-end consumption and those that engage in broad-based consumption was due to the impact of COVID-19 restrictions. Although the new coronavirus restrictions were completely lifted in early 2022, the gap in growth rates will continue to decline until 2023. It continues until the end of the year. “Most services that were closed during the pandemic have fully resumed. This disconnect is not just caused by the coronavirus restrictions, but by the fundamentally rapid growth of ‘wealthy India’…”
The report cites government tax changes, adjustments in equity and gold prices, and competition from new entrants for incumbents as potential risks.